Business travel can be a bit of a juggling act—there’s so much to keep track of, from flights and hotel stays to meals and small expenses. Without a standardized travel and expenses policy, things can get messy quickly, leading to overspending, confusion, or even worse, fraud.
Whether you’re running a startup or are part of a larger organization, having a clear T&E policy in place will make life easier for everyone, from employees to managers. It brings order to the chaos and ensures everyone’s on the same page when it comes to managing travel costs.
Why Every Business That Sends People Places Needs a Well-Defined T&E Policy
A travel and expenses policy (T&E policy) is like a regulatory framework for managing the costs that come with business travel—flights, hotels, meals, and anything else that pops up along the way. It lets employees know exactly what they can get reimbursed for and how to submit those expenses. So, why should your business have one?
Well, first off, it helps keep the finances in check by setting clear budgets and preventing overspending. It also creates fairness because everyone follows the same rules, so there’s no confusion about what’s acceptable to claim.
Plus, it makes the reimbursement process smoother for both employees and the finance team. On top of that, it helps with tax compliance, keeping everything organized for those important deductions. Most importantly, it minimizes the likelihood of fraud or misuse by clearly defining what is acceptable and what is not.
Having a T&E policy just makes everything easier and fairer for everyone. A study by Certify found that only 72% of organizations have a formal T&E policy in place. Of those, 58% reported that travelers’ understanding of the policy is “decent but in need of improvement.” This lack of clarity can lead to inconsistent compliance and, ultimately, higher expenses.
What Should Every Travel and Expenses Policy Have?
Here are the essential components of a T&E policy and how they help manage costs, ensure fairness, and keep everyone on the same page.
1. Travel Authorization Process
Before your employees even step foot on a plane or book a hotel room, they need approval. The travel authorization process is the first step in any well-crafted travel and expense policy. This is essential because it ensures that all travel is purposeful, aligns with business goals, and stays within budget.
Think of it as your company’s way of checking in before an employee commits to any travel plans. Here’s how it typically works:
- Who approves the trip? Usually, a supervisor, manager, or department head.
- When is approval needed? For long-distance or expensive trips, approval is a must. For smaller, local trips, you can have more flexibility.
- What information is required? Employees should submit trip details, including the purpose, destination, estimated costs, and expected dates.
This step is crucial for avoiding unnecessary trips that don’t directly contribute to the company’s objectives. It’s a simple way to ensure travel and expense policy compliance from the get-go.
2. Expense Categories: What’s Reimbursable and What’s Not?
One of the most important components of a T&E policy is defining the expense categories. Employees need clear guidance on what qualifies as a legitimate expense and what does not. This is where clarity is key, and confusion can be easily avoided.
Here are the most common categories for business-related travel expenses:
- Transportation – This includes flights, car rentals, taxis, or public transit. Define whether employees can book business or economy class, and set guidelines for car rentals (e.g., what type of car is acceptable).
- Accommodation – Does your company have a preference for certain hotels or price ranges? Outline your policy for hotel bookings and whether employees are allowed to book beyond the cheapest options available.
- Meals – A travel expense guideline should include daily meal allowances, whether employees can claim reimbursement for business meals with clients, and if they need to provide receipts for each meal.
- Incidentals – These include small expenses like internet fees, parking, or tips. It’s important to specify limits for these as well.
- Entertainment – Expenses related to business meetings, entertainment, or networking events should be clearly outlined so employees know when it’s appropriate to claim these.
A clear breakdown of expense categories helps ensure that employees are less likely to make mistakes or push boundaries when submitting claims.
3. Spending Limits: Setting Boundaries
Nothing helps keep a budget on track like having spending limits for each expense category. Setting these limits ensures that employees don’t go overboard on things like meals, accommodation, or transportation. It also helps with travel and expense policy compliance, as it gives everyone a benchmark to follow.
For example:
- Meals – Set a daily limit for breakfast, lunch, and dinner. If an employee’s meal exceeds this limit, they might need to cover the difference themselves.
- Lodging – If your employees travel to various cities, the cost of accommodation can vary significantly. Specify how much can be spent based on the destination—maybe a $200-per-night cap for hotels in a major city versus $100 in a smaller town.
- Transportation – Should employees book business class, or is economy sufficient? How much should they spend on a rental car? Being clear on these details keeps everything within reason.
Setting these boundaries upfront makes it easier for both the employees and the finance team to manage and track expenses. This reduces the risk of surprise overages and ensures transparency.
4. Booking Guidelines: Making Travel Arrangements Efficiently
How employees go about booking their travel is another key component of your T&E policy. Enhancing the booking process ensures that employees are getting the best possible rates while adhering to company guidelines.
- Preferred Vendors – Some companies choose to work with specific travel agencies or online booking platforms that offer better deals or discounts. You can require employees to book through these vendors.
- Booking Timeframes – Some policies encourage employees to book flights or accommodations well in advance to take advantage of lower rates. Specify the earliest time they can book (e.g., at least two weeks before travel) and any exceptions to this rule.
- Upgrades and Exceptions – In certain situations, employees may want to upgrade their travel experience (e.g., upgrading to business class or staying in a luxury hotel). If your policy allows this, make sure it’s for business purposes and not for personal convenience.
The easier and more straightforward the booking process, the less likely employees are to go outside the company’s guidelines or exceed the budget.
5. Per Diem Allowances: Daily Stipends for Employees on the Go
For many businesses, per diem allowances are a standard practice when employees travel. This is a set amount of money given to employees each day to cover meals, transportation, and other incidental expenses. It’s a great way to keep things simple while allowing employees some flexibility in their spending.
Here’s how per diem typically works:
- Daily Amount – Your policy will specify how much is allotted for meals and incidentals each day.
- Regional Variations – Per diem rates might vary depending on the location. For instance, expenses in big cities like New York or Tokyo will naturally be higher than in smaller cities or rural areas.
- What’s Included – Be clear on whether the per diem covers all expenses or just meals and incidentals.
Per diems are great because they eliminate the need for employees to submit every receipt, simplifying the reimbursement process while keeping costs predictable.
6. Expense Reporting: Keeping Everything Documented
Once the travel is over, employees must submit an expense report for reimbursement. This is one of the most important steps in the entire travel and expenses policy because it ensures accountability and transparency.
Here’s what to include in your reporting process:
- Submission Timelines – Define a clear timeline for when employees should submit their reports. A typical timeframe might be within 30 days of completing the trip.
- Required Documentation – Employees should include receipts for all expenses, along with any additional documentation such as itineraries, boarding passes, or hotel invoices.
- Expense Reporting Tools – If your company uses an automated platform or expense management system (like Concur or Expensify), make sure to include guidelines on how to use it.
Having a consistent, well-defined expense reporting process ensures that employees understand what they need to submit and that the finance team knows exactly how to process claims efficiently.
7. Reimbursement Process: Getting Employees Paid Quickly
The final step is the reimbursement process. This part of the T&E policy defines how and when employees will be reimbursed for their out-of-pocket expenses. Here’s what to keep in mind:
- Reimbursement Timeframe – Establish a clear timeline for how quickly employees can expect to be reimbursed. Typically, reimbursements should happen within 30 days of the report submission.
- Direct Deposit vs. Checks – Will you reimburse employees via direct deposit, or will checks be issued? Make sure employees know what to expect.
- Expense Approval – Before reimbursements are processed, someone should review the expenses to ensure they comply with the company policy.
A timely and efficient reimbursement process is essential for employee satisfaction and helps maintain trust in the company’s policies.
8. Non-Reimbursable Expenses: Drawing the Line
It’s just as important to define what non-reimbursable expenses are. Setting boundaries helps prevent employees from mistakenly submitting inappropriate claims. Some common non-reimbursable expenses include:
- Personal items like souvenirs
- Excessive tips or personal expenses like movies and entertainment
- Alcoholic beverages (unless part of a business meal)
- Fines for traffic violations
Being upfront about these exclusions can save everyone from frustration later on.
Have a T&E Policy That’s Clear, Fair, and Flexible
When you’re putting together your T&E policy, think about striking a balance between clear guidelines and flexibility. You want your employees to know the rules but also have the freedom to make decisions without feeling too restricted. Also, remember that travel expenses can change depending on where people are going, so adjusting your policy for regional differences is key.
Aligning the policy with your company’s values is also important, like if sustainability matters to your team, encourage eco-friendly travel choices. And don’t forget to keep the policy fresh! The travel world and your business needs change, so it’s good to review and update your policy regularly.